1. 1-1 Logistics Management LSM 730 Dr. Khurrum S. Mughal Lecture 14

2. 13-2 CR (2004) Prentice Hall, Inc. Method appraisal  A continuous location method  Locates on the basis of transportation costs alone The COG method involves  Determining the volumes by source and destination point  Determining the transportation costs based on $/unit/mi.  Overlaying a grid to determine the coordinates of source and/or destination points  Finding the weighted center of gravity for the graph COG Method

3. 13-3 CR (2004) Prentice Hall, Inc. COG Method (Cont’d) where V i = volume flowing from (to) point I R i = transportation rate to ship V i from (to) point i X i,Y i = coordinate points for point i = coordinate points for facility to be located

4. 13-4 CR (2004) Prentice Hall, Inc. COG Method (Cont’d) Example Suppose a regional medical warehouse is to be established to serve several Veterans Administration hospitals throughout the country. The supplies originate at S 1 and S 2 and are destined for hospitals at H 1 through H 4. The relative locations are shown on the map grid. Other data are: Note rate is a per mile cost Point i Prod- uctsLocation Annual volume, cwt. Rate, $/cwt/ mi.X i Y i 1 S 1 ASeattle8,0000.020.67.3 2 S 2 BAtlanta10,0000.028.63.0 3 H 1 A & BLos Angeles 5,0000.052.03.0 4 H 2 A & BDallas3,0000.055.52.4 5 H 3 A & BChicago4,0000.057.95.5 6 H 4 A & BNew York6,0000.0510.65.2

5. 13-5 CR (2004) Prentice Hall, Inc. COG Method (Cont’d) Map scaling factor, K

6. 13-6 CR (2004) Prentice Hall, Inc. COG Method (Cont’d) Solve the COG equations in table form iX i Y i V i R i V i R i V i R i X i V i R i Y i 10.67.38,0000.02160961,168 28.63.010,0000.022001,720600 32.03.05,0000.05250500750 45.52.43,0000.05150825360 57.95.54,0000.052001,5801,100 610.65.26,0000.05 300 3,180 1,560 1,2607,9015,538

7. 13-7 COG Method (Cont’d) Now, X = 7,901/1,260 = 6.27 Y = 5,538/1,260 = 4.40 This is approximately Columbia, MO. The total cost for this location is found by: whereK is the map scaling factor to convert coordinates into miles. CR (2004) Prentice Hall, Inc.

8. 13-8 CR (2004) Prentice Hall, Inc. COG COG Method (Cont’d)

9. 13-9 CR (2004) Prentice Hall, Inc. COG Method (Cont’d) 2,360,882 Total 660,4920.056,0005.210.66 196,6440.054,0005.57.95 160,7330.053,0002.45.54 561,7060.055,0003.02.03 271,8250.0210,0003.08.62 509,4820.028,0007.30.61 TCRiRi ViVi YiYi XiXi i Calculate total cost at COG

11. Example The firm is considering 2 alternative sites for its new facility, France and Denmark After evaluating the firm’s Needs, the Managers have Narrowed the list of Important Selection Criteria down into 5 major Factors. – Labor availability and attitude – People to car ratio – Per capita income – Tax structure – Education and Health

13. Factor Rating Example Since factor weights, selected factors, and assigned scores are all determined subjectively, the managers should be very careful in selecting these items and numbers.